Finance companies in South Africa slapped with R1.8 million in fines
The Financial Sector Conduct Authority (FSCA) has imposed R1.8 million of administrative sanctions on two firms for violating provisions of the Financial Intelligence Centre Act (FIC Act).
The companies slapped with sanctions were Prime Collective Investment Scheme Management Company (Prime) and Wealth Portfolio Managers (Wealth).
Prime is a licensed collective investment scheme manager and Wealth is a licensed financial services provider. Both entities are accountable institutions under the FIC Act.
The FSCA imposed an administrative sanction of R1.6 million on Prime. However, R600,000 of this fine was conditionally suspended for three years.
Wealth received a fine of R200,000.
According to a statement by the FSCA on 12 December, both entities failed to implement adequate risk management and compliance programs (RMCPs), as required by Sections 42(1) and (2) of the Act.
They also failed to conduct appropriate customer due diligence, including verifying beneficial ownership information, identifying politically exposed persons, and performing ongoing due diligence, as required by Sections 21B, 21C, 21F, and 21G.
Wealth specifically failed to scrutinise client information against the United Nations Security Council Targeted Financial Sanctions Lists, as mandated by the Act.
Additionally, the FSCA said that Wealth’s senior management failed to ensure compliance with the FIC Act as well as RMCPs.
“The FSCA considers Prime and Wealth’s compliance deficiencies to be serious breaches of the FIC Act,” said the FSCA.
The FSCA said that the requirement to understand and mitigate money laundering and terrorist financing risks through effective implementation of an RMCP is vital.
This is “not only because it assists accountable institutions to protect and maintain the integrity of their own businesses but also because it helps contribute to the integrity of the South African financial system as a whole.”
“Additionally, proper due diligence of all clients is crucial to help identify and mitigate against suspicious and criminal elements from infiltrating the financial system,” added the authority.
The FSCA continues to up the ante in its fight against non-compliant units within the country’s financial sector.
According to its recently published 2023/24 Integrated Report, the FSCA imposed approximately R943 million in administrative penalties on 31 people for the year ending 31 March 2024 – a significant increase from the previous year’s R100 million placed on 44 people.
Among other reasons for the increase in penalties is the FSCA attempting to meet requirements for South Africa to get off the Financial Action Task Force’s (FATF’s) ‘grey-list’.
In February 2023, the FATF greylisted South Africa due to inadequate measures against money laundering, terrorist financing, and proliferation financing.
Being on the grey list means the country must address strategic deficiencies within specified timeframes and is subject to intensified monitoring.
The FATF has highlighted the need for South Africa to implement a robust strategy to counter terrorism financing, enhance anti-money laundering efforts, and improve the investigation and prosecution of complex financial crimes – which the FSCA has been clamping down on.
Overall, the FSCA said that these new sanctions serve as reminders that it “will not tolerate non-compliance with the FIC Act.”
“All accountable institutions are urged to continually review and enhance their anti-money laundering and terrorist financing controls at the highest levels and to conduct thorough risk assessments on a regular basis. Failure to do so will result in firm regulatory action,” it added.
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